There will be "further material reserve requirements and downgrades'' at HSBC after declines in U.S. home prices during the first half of 2008, Morgan Stanley analysts led by Hong Kong- based Anil Agarwal said in a report today.

Bad debts at HSBC Finance Corp., the bank's U.S. consumer banking unit, may rise to $15 billion this year from $12.5 billion, Morgan Stanley said.